International Financial Regulation, Compliance, and Ethics
Domain 7 tests the prudential rulebook, the Korean supervisory architecture and conduct standards. Expect numeric capital calculations, correct allocation of supervisory mandates, and questions about handling conflicts and material non-public information.
Rulebook map
- Basel III: CET1 4.5% plus a 2.5% capital conservation buffer (7.0% total), Tier 1 6.0%, total capital 8.0%, leverage ratio 3.0%, LCR and NSFR of 100%, plus a D-SIB surcharge.
- Korea: the FSC sets policy, the FSS supervises, and the FSCMA governs capital markets, alongside the Banking Act, the Act on Reporting and Use of Specific Financial Information (AML) and the Foreign Exchange Transactions Act.
- AML/CFT: FATF Recommendations, customer due diligence, enhanced due diligence for PEPs, suspicious transaction reporting, the travel rule, and sanctions screening against UN, OFAC and EU lists.
Worked example
A bank has RWA of KRW 100trn and CET1 capital of KRW 7.6trn, a 7.6% ratio. The minimum including the conservation buffer is 7.0%, so the bank clears it. But a 1.0% D-SIB surcharge raises the requirement to 8.0%, leaving a shortfall of 0.4%, or KRW 400bn. The buffer can be drawn down under stress with distribution restrictions; the 4.5% minimum cannot.
Traps that cost marks
Confusing the FSC's policy role with the FSS's supervisory role; assuming buffers are freely usable without consequences for dividends; reducing AML to KYC forms rather than ongoing monitoring; mishandling MNPI and personal account dealing, which is an ethics failure even when nothing is traded on the information.